8 Benefits of Using Credit Cards – For those With Discipline

Personally, I’m fortunate enough to have never been in credit card debt. It’s always been a part of my financial ways to try to pay off credit card bills in full during each billing cycle. So, thankfully, I’ve avoided the stress involved with over reliance on credit cards, and the need to pay off credit card debt. Frankly, I’ve seen that there are even benefits of using a credit card.

A few months ago, I was talking to a friend about somebody we both knew. I don’t keep in touch with this other person, and see her extremely infrequently, as in once every few years. However, my friend is more involved in a different circle of people, and communicates more with this other person. Anyway, he shared with me that this person – we’ll call her “Jill” – was unemployed and running out of money. Being single, she didn’t have a spouse’s income to help her. Clearly, she hadn’t saved much, and now was carrying a credit card balance.

My friend was suggesting (to me, not her) that Jill should just stop using cards altogether, as that’s what probably got her into the mess in the first place, or at least contributed to it. In his view, anyway. To me, this isn’t the problem. If overspending is the issue, it’s more her self-discipline and financial literacy that’s the problem. I don’t know her that well at all, but recall talking about jobs and careers with her once. She seemed to have her head on straight and seemed otherwise intelligent. This is why I’m guessing it’s discipline and knowledge that are the culprits.

Now, I do think that Jill should focus on A) finding a source of income, some way, some how; and B) eradicate that credit card debt as soon as possible. However, In my view, credit cards in general can be a valuable tool for people to use. Thus, I don’t advocate her giving up credit cards altogether.

Advantages of Using a Credit Card

Rewards. First off, I will say that paying cash can sometimes provide a benefit. When you ask for a discount and offer to pay in cash, you might get a deal. However, this is tough to do for most purchases. Thus, if you charge a lot of your day to day shopping, you’re not missing out on cash discounts and can in fact receive rewards. I slowly accumulate airline miles with one of my credit cards, and have a round trip airfare awaiting for my efforts!

Cash Back. Some cards can offer a different kind of “reward” – money back. There are some interesting cash back credit cards out there, and quite a number of people like this option. An effective discount on purchases, if possible, is a nice perk.

Building Credit. By having credit, and paying off bills regularly and on time, people can prove themselves to be creditworthy. When buying a home, for example, having a good credit score can help secure a good interest rate, much less a loan in the first place.

Float. By paying cash, you’re shelling out money right away. By charging, you’re delaying payment. If you could let the money sit in an interest-bearing account for an extra 20 days, for example, you might earn a little extra money this way. When aggregated throughout the year, this can amount to something more than just a few pennies. Why not take advantage?

Tracking Expenses. With credit cards, each transaction is automatically recorded, and you can easily view a summarized list of expenses for a given time period. By paying cash, it makes it that much more time consuming to keep track of expenses. More knowledge can result in taking action on potential overspending, and can engender better habits.

Consumer Protection. In some cases, there is some level of insurance involved with credit card use. In other words, some cards can offer you warranty protection in certain cases, travel insurance, or even rental car insurance.

Ability to Make Certain Purchases. Whenever I have rented a hotel room or a car, I’ve needed to have a credit card to complete the transaction. Avoiding having a credit card can make such transactions more difficult.

Convenience. Let’s say you charge something that cost $11.02. Yeah, it’s a random number, but work with me for this example. If you pay with a credit card, you get a receipt back. If you pay by cash, you get change. If you hand over a $20 bill, you’ll back get one $5 bill, three $1 bills, three quarters, two dimes, and three pennies. That’s the best case. Who wants to lug around that much change?

Now, these are all great reasons to use credit cards. However, use of credit cards should be accompanied by self-discipline. Pay your bills on time, in full, every month. Additionally, don’t buy more than you would otherwise buy if paying in cash. If you can do those things, credit cards can be an essential part of one’s finances.

As for Jill, from the discussion above? I think that the notion that she should abandon credit cards altogether is overreacting. Discipline with credit cards is the key for her, along with reducing that balance ASAP.

My Questions For You:

What’s your view on self-discipline and credit cards? Is it different than mine?

Do you know of any other advantages (or disadvantages) of using credit cards, that you can share?

What do you think of the notion that Jill’s biggest problem is self-discipline, as opposed to the use of credit cards?

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If it’s something I save for (house repairs, care repairs,vet bills, vacation) it goes on the credit card. Then, when it’s all over, I can transfer the money from savings directly to pay the credit card bill. Never once does this financial transaction then effect my regular budget. And every once in a while, I get $100 gift cards via credit card points.
Still, it took us a while to get to this place. There was a time when we couldn’t use our credit cards at all because we had not yet developed the discipline and the system to use them appropriately (and we were paying them off).
But like it or not, I think this is one of those things that people need to figure out on their own. Simply telling someone to stop using credit cards or that they need to develop discipline doesn’t work. Helping them devise a budget or a system, if they want that, does.

shanendoah – I tend to agree. True, people often need help with setting up a budget or getting things on track. It helps to see that things are actually possible. Once that’s in place, it probably makes it easier to develop self-discipline since what’s being asked is then demonstrated to be possible and believable.

I used to use my debit card to pay for everything but once I joined a rewards program I switched to putting almost all my expenses on my credit card. I pay for lunches with cash because a lot of places don’t take credit cards but that’s about it. I never put more on my credit card than I have liquid in cash to pay off in full each month. I’m not a fan of debt! -Sydney

I agree with most of your comments but I don’t think letting the credit card company track my expenditures is a benefit. I’d rather not have my entire spending history out there for anyone with access to review and analyze. Yes, not many have access (that YOU know of).

To me, it shows a lack of discipline if you aren’t even willing to track your own expenses.

But you make good points on the other fronts. Credit cards are a tool, neither good nor bad in and of themselves.

Marie – sorry I wasn’t clear. I didn’t mean that I wanted the company to do that. Rather, information is easily consolidated and trackable for the card holder to do his/her self. It’s tougher with cash, at least for me.

101C – How about using a credit card and paying it off in full every month? Plus, you can still do tracking on your own, but if you go online you have a history of transactions right there for you to download and categorize to your heart’s content!

I don’t think there’s enough information about Jill’s situation to give a considered opinion, because it would matter how long she’s been unemployed. If it’s been 3-4 years and she’s turning to credit cards, I doubt the issue is self-discipline. Not many people keep that large of an emergency fund available. If it’s been a month or less than a year, it could be either a lack of self-discipline (especially if she already had credit card debt) or just plain old poor planning. (Failure to save up an emergency fund.)

When I had credit card debt, it was due to a combination of the two. (I want it now + poor planning.)

Jackie – very good points, no question. There are other factors at play that can determine the cause of the problem, be it poor planning, lack of self-control, or a really unfortunate job market. Your comment also does a nice job of touching on a separate topic of emergency funds, which are most certainly crucial for many of us….even if we don’t see the immediate need. That’s why they’re emergency funds!

A lot of people are out of work and living on their credit cards. I don’t think there is any practical decision other than keep going. I hope Jill gets a new job soon, so she can repay all of that debt.

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Disclaimer

We are well meaning folks that are not investment professionals or financial advisors. Please feel free to have fun here, and take this information in the spirit of entertainment, as it is not financial or legal advice, For that, seek an appropriate professional. Your actual financial decisions are your own responsibility. Thank you.